Overview
The Inflation Reduction Act introduced prevailing wage and apprenticeship (PWA) requirements that must be met to claim the full value of many clean energy tax credits. Projects that do not meet these requirements receive only the base credit rate (typically 6% for investment credits or $0.03/kWh for production credits), while compliant projects receive the enhanced rate (30% or $0.15/kWh).
Without PWA Compliance
Base credit rate applies
With PWA Compliance
Enhanced credit rate (5x multiplier)
Prevailing Wage Requirements
Prevailing wage refers to the hourly wage, benefits, and overtime paid to laborers and mechanics in the locality where the project is located. Wages are determined by the Department of Labor and vary by location and trade classification.
- During construction of the facility
- During alteration or repair of the facility
- For the entire credit period (production credits)
- 1Identify the project location (county and state)
- 2Determine the type of construction (building, heavy, highway, residential)
- 3Look up wages using the DOL website or sam.gov
- 4Apply the correct wage for each trade classification
If prevailing wage requirements are not initially met, taxpayers may cure violations by:
- Paying back wages to affected workers
- Paying a penalty to the IRS ($5,000 per worker)
Apprenticeship Requirements
Projects must ensure that a certain percentage of total labor hours are performed by qualified apprentices from registered apprenticeship programs:
If a taxpayer makes a good faith effort to comply with the apprenticeship requirements but is unable to meet them, the requirements may still be satisfied if:
- Requests for apprentices were made to registered apprenticeship programs
- Any apprentices who were provided were employed
- Documentation of efforts is maintained